Fifth Circuit Sounds The Death Knell For BSEE Jurisdiction Over Offshore Contractors

by Baker Donelson
Contact

Since October 2011, when the Bureau of Safety and Environmental Enforcement (BSEE) issued its first-ever Incidents of Non-Compliance (INCs) against offshore contractors (Halliburton and Transocean) in the wake of the DEEPWATER HORIZON blowout, the offshore industry and BSEE have been engaged in a literal “war of words” over a simple question of statutory and regulatory construction: does BSEE’s authority under the Outer Continental Shelf Lands Act (OCSLA) and the regulations promulgated thereunder extend to offshore contractors? This blog has followed the pitched battles along the way, from the first volley of BSEE’s initial issuance of the INCs to Halliburton/Transocean, through its continuing sorties under its self-proclaimed jurisdiction over contractors across the OCS, and (most recently) its checkered retreat into the appellate court after two different district courts rejected its positions and sided with offshore contractors.

These relatively minor skirmishes culminated in a decision issued by the United States Fifth Circuit Court of Appeals on September 27, 2017 in USA v. Black Elk Energy Offshore, Case No. 16-30561 (5th Cir., Sept. 27, 2017), which confirmed once and for all (pending a potential final offensive in the Supreme Court of the United States) that BSEE does not have regulatory enforcement jurisdiction over offshore contractors: “the OCLSA regulations do not apply [to offshore contractors].” In short, the Fifth Circuit in Black Elk held that the plain language of BSEE’s primary regulation (30 C.F.R. §250.105) defining its safety-regulatory jurisdiction (which authorizes enforcement only against the group of entities included within the defined term “You” in the regulation) does not include offshore contractors: “Section 250.105 unambiguously defines ‘You’ to mean ‘a lessee, the owner or holder of operating rights, a designated operator or agent of the lessee(s), a pipeline right-of-way holder, or a State lessee granted a right-of use and easement[,]” [and] [t]his definition excludes contractors.” Black Elk, at p. 11. The court further bolstered this plain-language reading by noting that for essentially six decades, BSEE itself (and its predecessors) in prior regulatory statements, and the regulatory history of §250.105, expressly indicated that offshore contractors would not be subject to BSEE’s safety requirements:

[T]he drafting history of the definition of “You” undermines the government’s recently coined interpretation. In 1998, BSEE proposed to rephrase Part 250 in plain English, replacing the term “lessee” with “You.” A comment submitted during rulemaking sought to define “You” to include “any person an MMS order or decision may adversely impact.” Postlease Operations Safety, 64 Fed. Reg. 72756, 72758 (Dec. 28, 1999). As the appellees note, this proposed language would have extended the definition of “You” to contractors. Because complex, overlapping cross-indemnity provisions are an inherent feature throughout the oil and gas industry, actions taken against lessees could adversely impact multiple layers of contractors and subcontractors that might have been swept into this broader proposed definition of “You.” But BSEE rejected this comment and its proposed language in favor of a definition limited to lessee/permittee/designated operator responsibility.

Until very recently, public statements by the regulating agencies confirmed that the regulations do not apply to contractors. In March 2011, BSEE promulgated a new “Safety and Environmental Management Systems” rule designed to respond to the Deepwater Horizon incident and spill. The agency conducted a public workshop for oil and gas companies and advertised in bold, fully capitalized, underlined text that “30 CFR 250.105 defines ‘YOU’ . . . This definition DOES NOT include a CONTRACTOR.” Further, when publishing the final rule, BSEE stated that it “does not regulate contractors; we regulate operators.” 75 Fed. Reg. 63610, 63616 (Oct. 15, 2010). The government asserts that these statements were issued in connection with different rules applicable only to leaseholders and operators, but we are unpersuaded. The new rule pertains as much to safety and the environment as the regulations these appellees are charged with violating.

The consistency of over sixty years’ prior administrative practice in eschewing direct regulatory control over contractors, subcontractors and individual employees supports the district court’s conclusion that these regulations do not apply [to offshore contractors].

Black Elk, pp. 13-14. Moreover, the court noted that in addition to this “half century of agency policy” contrary to BSEE’s self-proclaimed jurisdiction over contractors, BSEE’s own recetn regulatory actions undercut any argument that contractors were meant to be covered by prior regulations: “when BSEE has promulgated recent regulations, it has gone out of its way to specifically include contractors and subcontractors within the regulatory purview” – which would not be necessary if contractors were already somehow included. In short, the Fifth Circuit adopted (in one form or another) all the arguments interposed in the lower courts (as discussed in detail here) against BSEE’s claim of jurisdiction over contractors. Id. at p. 18, 20.

Notably, the Black Elk decision (as explained in a prior post) ostensibly concerned only BSEE’s criminal jurisdiction over contractors. A parallel case, Island Operating Co. v. Jewell et al., Case No. 16-145 (W.D. La. Dec. 23, 2016), concerned BSEE’s civil jurisdiction over contractors – i.e. its ability to issue INCs and civil monetary penalties for alleged violation of BSEE safety regulations. Both lower courts, in each context, held that BSEE has no jurisdiction over contractors (criminal or civil), and BSEE appealed both outcomes. Notably, however, the parties to the Island Operating appeal agreed to a stay of the appellate proceedings pending the Fifth Circuit’s criminal-context decision in Black Elk. Thus, the civil-context decision in Island Operating is still technically pending, and ostensibly the Fifth Circuit will need to issue a separate decision regarding BSEE’s civil jurisdiction.

However, the Fifth Circuit’s Black Elk decision appears to be a coup de grace for both the criminal and civil enforcement questions. Specifically, the court expressly acknowledged that while it was only squarely faced with the question of whether BSEE’s criminal indictments in the case were valid, this question necessarily implicated whether BSEE’s regulations even applied at all (criminally or civilly) to offshore contractors:

To resolve this appeal, however, we need not decide whether OCSLA’s criminal liability provision could extend to contractors, subcontractors and their employees. If OCSLA regulations in force at the time of the incident do not apply to the appellees, they cannot be held criminally liable even if the statute authorizes regulations that could foist criminal liability upon them. Consequently, we assume arguendo, without deciding, that section [BSEE regulations] may expose contractors and subcontractors to criminal liability, and move on to the issue of whether the regulations can support this criminal indictment.

In other words, while the issue before the Fifth Circuit in Black Elk was only criminal jurisdiction, the court found that it had to answer the more fundamental question of whether BSEE’s regulations apply at all to offshore contractors before it could reach the specific question of criminal liability.

As a result, and as a practical matter, the Black Elk panel’s decision will (presumably) simply be adopted wholesale by the panel in the Island Operating case, which (to reiterate) was already stayed to await the outcome of Black Elk. It is somewhat curious that the Black Elk court chose to issue such a broad and sweeping opinion – arguably beyond the discrete scope of the actual case and controversy at issue viz. BSEE’s criminal jurisdiction – that effectively subsumes the issue pending before another Fifth Circuit panel. Nonetheless, the detailed analysis by the Black Elk court concerns (effectively) the same issues underlying the appeal in Island Operating. Thus, it appears that the Black Elk court’s opinion has fully and finally defeated BSEE’s self-proclaimed, newly minted extension of jurisdiction over offshore contractors. And pending any further review in the Supreme Court (which is relatively unlikely, given that the Supreme Court tends to only review cases where federal circuits disagree, and given that the Fifth Circuit is the only federal circuit with any significant jurisprudence regarding offshore law), BSEE’s “universal thump” will no longer be passed ’round.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Baker Donelson | Attorney Advertising

Written by:

Baker Donelson
Contact
more
less

Baker Donelson on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.